Health Minister Shane Reti sacks Health NZ board, replaces with commissioner due to cost overrun

The board of Health New Zealand Te Whatu Ora is being replaced with a commissioner following “serious concerns around oversight, overspend and a significant deterioration in financial outlook”.

Health Minister Shane Reti described the directive as the “strongest ministerial intervention available” under the Pae Ora Act and not a decision he had taken lightly – “however the magnitude of the issue requires such action”.

Reti said Professor Lester Levy, the recently appointed chair of Health New Zealand, would be appointed Commissioner for a 12-month term.

“Health NZ first reported a deteriorating financial position to me in March 2024, despite earlier repeated assurances by the organisation that it was on target to make savings in 2023/24,” Reti said.

“In the months since, the situation has worsened. Health NZ is currently overspending at the rate of approximately $130 million a month.”

Health Minister Shane Reti. Photo / RNZ / Angus Dreaver

Reti claimed the issues at Health NZ had stemmed from previous government’s “botched” and “mismanaged” health reforms that had resulted in “an overly centralised operating model, limited oversight of financial and non-financial performance, and fragmented administrative data systems which were unable to identify risks until it was too late.”

He said “without urgent action” the situation would lead to an “estimated deficit of $1.4 billion by the end of 2024/25 – despite this Government’s record investment in health of $16.68b in this year’s Budget.”

Reti said the coalition Government had invested billions of dollars to support frontline healthcare services but he was “not confident” he would “have adequate oversight” of that spend if the existing board structure at Health NZ were to remain in place.

Levy would be tasked with implementing a turnaround plan with a savings objective of approximately $1.4b “to ensure financial balance, and actions to strengthen governance and management”.

Prime Minister Christopher Luxon and Health Minister Dr Shane Reti announce a major shake-up of the Health NZ board at the Beehive today. Photo / Mark Mitchell

“Operational responsibility for the turnaround plan will sit with the Commissioner, however I have made it clear that it should focus on cost efficiencies in areas such as any back-office bureaucracy which has blown out, particularly in middle management, as a result of the previous government’s damaging reforms.

“As one example between March 2018 and March 2024, back-office staff numbers which formerly sat at district health board level grew by around 2500.

“Lester Levy has assured me there will be no adverse impacts on the delivery of care in implementing a turnaround plan – rather, he and Health NZ will be seeking to bring the frontline closer to decision-making.”

He said today’s announcement was in “no way” a reflection of the work of frontline staff in hospitals and healthcare facilities.

“I thank them for their professionalism and want to reassure them that we are taking these steps to secure a better future for health in New Zealand.”

‘Appalling implementation’ - PM Christopher Luxon explains Health NZ shake-up

Prime Minister Christopher Luxon says delivery of better public services, particularly healthcare, was one of his government’s top priorities.

However, people were waiting too long – and targets had been set to address that.

Part of delivering on the targets was robust management - but the current Health NZ board was facing major challenges.

“The problems at Health NZ while complex are obvious... Frankly it was an appalling implementation,” Luxon said, referring to the actions taken by the previous government following the consolidation of the previous DHBs.

It resulted in an “overly centralised” system that was disconnected from the frontline staff, he said.

Prime Minister Christopher Luxon and Health Minister Dr Shane Reti deliver the post-Cabinet press conference at the Beehive. Photo / Mark Mitchell

It was not a funding issue, Luxon said.

But those failures now required an “urgent and significant” intervention, he said.

A commissioner would be put in place to streamline back office management, establish a single point of accountability and reduce the space between the front and back lines.

Luxon said it was not a funding problem, but a management problem.

Reti said Health NZ has not been able to deliver on the services New Zealanders expect.

Core parts of the health reforms had led to governance issues that were worse than first thought, he said.

“No one has been adequately watching ... or monitoring” the Crown entity, he said.

“We need to take decisive action now.”

Today’s move was a very “significant step”, he said.

Asked what the entity was overspending on, Reti said it was a combination of things including out-sourced and back-office staff.

Reti said he had faith in the commissioner but he said it was not for him to “have faith” in the chief executive.

He said it was for the commissioner to appoint their executive team - in response to a question about having faith in that executive team.

On cultural aspects within the entity, such as karakia, Reti said Levy would take advice from the Houhora Māori Committee.

Prime Minister Christopher Luxon at today's post-Cabinet press conference. Photo / Mark Mitchell

On President Joe Biden, Luxon said this was leader that had given 50 years of public service, a “significant” achievement.

On his recent visit to the US, Luxon said he has not met Kamala Harris or Donald Trump.

He did not seek a visit with Harris while he was in the US.

‘Shameful part of our history’

On the Royal Commission of Inquiry into abuse in care, Luxon said he would make a public apology at Parliament on November 12.

Luxon said the apology was important to get right. The inquiry’s report - due to be released this week - was almost 3000 pages long and there were 3000 survivors who had contributed.

He said he wanted to make sure they felt heard.

“This is a shameful part of our history.”

He said he has working his way through reading the report. The findings were horrific and harrowing reading, he said.

PM back on home soil

Luxon is back in New Zealand after his first political visit to the United States, where he met with scores of world leaders – including US President Biden – during the Nato Summit.

Today, Biden announced he would stand down from the presidential election race, saying it was in the best interests of the Democratic Party and the country. Biden has been facing growing pressure around his physical and mental health, and his capacity to serve another term as President.

Lifelong Democrat George Clooney had penned an opinion piece for the New York Times earlier this month imploring Biden to stand down. He acknowledged it was “devastating to say” but the Biden he had met recently at a fundraiser was not the same person as he was in 2020.

“We are not going to win in November with this President. On top of that, we won’t win the House, and we’re going to lose the Senate,” Clooney wrote.

Luxon acknowledged Biden’s announcement this morning on X, formerly Twitter, saying Biden had “dedicated his life to public service” which was something that deserved “much respect”.

“I thank the President for his leadership of the United States and his commitment to New Zealand. And I look forward to working with him for the remainder of his presidency.”

Luxon met with Biden during the Nato proceedings in Washington DC earlier this month, describing him at the time as mentally sharp and “on top of his brief”. Luxon maintained the issue of whether Biden had the capacity to serve another term as President “wasn’t a consideration in my head”.

Biden and Luxon had a couple of informal interactions at a White House dinner during the visit, Luxon saying he observed Biden’s “great sense of humour” and enjoyed the “excellent” interaction.

Asked whether Biden was sharp, Luxon said: “Yes, absolutely.”

Prime Minister Christopher Luxon (right) claimed US President Joe Biden was mentally sharp during their interactions.

Luxon met scores of world and political leaders during his US visit, including Canadian PM Justin Trudeau and Ukraine’s President Volodymyr Zelenskyy. He wrapped up his trip in the US with a meeting with California Governor Gavin Newsom, with whom he said he had a “good connection”.

Newsom has long been tipped as a future presidential candidate for the Democrats and was named by Clooney in his opinion piece calling for Biden to step down.

Republican presidential candidate and former President Donald Trump pumps his fist as he is rushed offstage during a rally on July 13, 2024 in Butler, Pennsylvania. Photo/ Anna Moneymaker/Getty Images

It has been just over a week since the assassination attempt on Republican candidate Donald Trump. Trump, the Republican candidate for the upcoming election, was speaking at a rally in Pittsburgh, Pennsylvania when several shots were fired, one grazing Trump’s right ear.

Julia Gabel is a Wellington-based political reporter. She joined the Herald in 2020 and has most recently focused on data journalism.